Protecting Your Stock Positions with Options | Steven Liguori | Skillshare

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Protecting Your Stock Positions with Options

teacher avatar Steven Liguori, Teaching is My Passion

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

14 Lessons (1h 30m)
    • 1. 01 Welcome Course Description

    • 2. 02 AAPL Stock Risk Graph

    • 3. 03 Why Protect Your Stock Position

    • 4. 04 Put Protection Basics

    • 5. 05 Protecting a Winning Trade

    • 6. 06 What's the Catch

    • 7. 07 How Do Different Expirations Affect Our Protection

    • 8. 08 How Do Different Strikes Affect Our Protection

    • 9. 09 INTC Protective Put Example

    • 10. 10 GE Protective Put Example

    • 11. 11 Ford Protective Put Dividend Considerations

    • 12. 12 EPD Protective Put Dividend Considerations

    • 13. 13 Implied Volatility Considerations

    • 14. 14 Evaluating Other Stocks

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About This Class

You wouldn't jump out of a plane without a parachute,.... would you???  Why do most people jump into the stock market with no protection?

When the Stock Market was doing nothing but going Up, everyone looked like a genius.  What happened when the party ended and the Market Dropped 20 - 30 Percent?  Many people lost a fortune.  You don't have to!

Protecting Your Stock Positions with Options shows how you can protect yourself and limit the Risk.

Every Trader and Investor has different Risk Tolerances and Time Horizons.  This course breaks down the Protective Put Strategy and explains how you can choose different Option Expirations and Strikes to suit your personal needs, account size, and comfort level. 

The course covers trade setups and ideas for stocks that are breaking out and stocks that are range bound.  I discuss how dividend stocks can boost your returns and how Implied Volatility, when setting up the positions, can affect the Edge you have on the trade, and the profit you can make.

I have heard people describe Options as confusing, complicated and risky.  When I was young my parents said "Don't touch the Stove".  Then as I grew up and understood how to use it, they said "Make your own dinner, the stove is right there."  What was once risky became a Tool. 

It is no different with trading Options.  Once you have the Education and Understanding of How to use Options to Your Advantage, your perception of them will change too!

Using Options properly can reduce risk, and give you the Peace of Mind you need to Trade the Current Markets with an Edge!

Let's get started!

Meet Your Teacher

Teacher Profile Image

Steven Liguori

Teaching is My Passion


A Tale of Two Careers….


Steve has been trading Stocks and Options since 1999.  With his passion for teaching, he has been a perfect fit as an Options Coach/Mentor for three Online Trading Education Companies.  The Founder and Options Coach at, Steve is available to answer your questions as well as provide One-on-One Online Personal Coaching Sessions.

Years of Coaching new and experienced Traders has given Steve the understanding of what struggling traders need most, clear explanations of the Processes that will lead them to the Success they are looking for in their Trading.


Prior to becoming a Full Time Trader, Steve was and still is an ASE Certified Master Automotive Technician.  He was... See full profile

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1. 01 Welcome Course Description: in this course on protecting your stock positions with options, I will show you how to head your risk on your stock positions so you can sleep at night. I will illustrate and explain how to examine the different expirations, different strikes as well as how to factor in implied volatility and how it can affect your position. This will allow you to choose the protection that is appropriate for your comfort level. Let's get started. 2. 02 AAPL Stock Risk Graph: I'm looking at a risk picture for 100 shares of Apple stock now Apple Stock because it's selling it to 67 right now. It would cost $26,700 to buy 100 shares of Apple stock. But let's say you have the money to do that, and you wanted to know what your risk waas. And even though Apple has been on a tear most of the year going higher, you heard it was going to 300 you believed it, and you want to see if you can participate in that move up toward 300 over the next couple of months. What the risk picture does is it shows you what the value of your position would be if price were to move up in the direction you want. Or if it price were moved down, you could see how much your risk on the trade is and how much you stand to lose. If you're wrong on the trade and Apple actually moves down, If I bring my mouse over and just hovered over the picture and move up near the to 70 mark here, you can see that I would be up $280 if the price got 2 to 70. Let's say I bought it today at 2 66 95 then Price went up 2 to 70. I'd be up up a couple $100 if Price could work its way up to 2 80 I'd be up $1300. And if it got upto 2 90 $2300. And if it did reach the $300 level, which is what my expectation is, it would be worth over $3000 more so I'd be risking essentially $26,700 to try and make that 3000. That's assuming that Apple stock could possibly go to zero. And while it's not likely that that could happen, there have been enough companies that have gone to zero even some big companies like WorldCom and Ron Lehman brothers to where you have to at least understand that the possibility exists. Now let's look at what the downside would look like. What if Price were to move down to 2 60? I'd be down $700. If it moved down to 2 50 I'd be down $1700. What if it came out here? The edge of this shaded area? I'd be it almost $2500 down while I mentioned this shaded area. Here is what this actually means on this broker platform. Think or swim. If I set this date up here to the date that I want in this case, I have it set to January 18th 2020 which is the January options expiration. What it does is it shades the area of the expected move or the move that would be more than likely toe happen. 68% chance that Apple will finish in between this range from 2 42 up to about 2 92 And if I set the date to a different date, it would shade a different amount of the price graph. So let's say I went to December options expiration. Then notice how it brought in the shaded area. Because over the time frame to December expiration, the 68% chance of movement is much less than if I brought it out to January. And if I wanted to see how much it would move to February and this doesn't mean it's gonna happen. This is just based on the current prices of the options that are being sold. The expectation of that move, based on the price, leads mathematically them to believe that the price could move this amount and that there's a 68% chance that it would stay in that range, which is the shaded area. So we use this as a guide to see where price might go, and it gives us a way to manage our risk. If Price were to go to that point or out ast faras that point, we could decide what our risk is and decide if there's something we would want to do to make the trade have less risk in certain areas. So I'm gonna move this back to the January expiration. For now, before I show you how to protect your stock position, we're going to spend some time looking at a few charts to see why protecting your position could be a good idea. 3. 03 Why Protect Your Stock Position: We're looking at a weekly chart of the price movement in Apple stock over the past three years and notice in the lower left of the chart. The low for this time period was $108.25 and we're currently at the all time high, which is on the upper right of the chart, where we've hit to 67 43. So if you were a buyer back in 2017 and you paid, let's say $110 a share, you spent $11,000 and your stock would now be worth $26,700. But the question is, could you have sat through all of the ups and downs of the stock? And as I look at the picture during 2017 in 2018 the price of the stock just seemed to move higher and grind higher in a reasonably organized fashion. But then, when we got over two October 2018 then we started to have a little issue. And if you look at how far it dropped from about 230 a share in October down to roughly 1 50 That was an 80 point drop. So if you had 100 shares of Apple stock, you would have had some good gains if you bought it back at 1 10 But the amount that you would have given back would have been $8000 for your 100 shares because it dropped 80 points. And for some people, that's no big deal. They could say, Hey, I'm buying the stock for the long haul. I think Apple's just gonna go up and keep going up. It's going to eventually go to 1000 so buying and holding it I have no problem just hanging on to it for years. And it's just gonna make me money year after year. And that very well may be the case. We just don't know. But there are plenty of stocks that were high flying and all of a sudden things changed. So let's look at a few of them. If I looked at the stock, General Electric General Electric was up at $32 a share back in the beginning of 2017 and it's been cut pretty much in three. It hit a low of between six and $7 a share of the beginning of 2019. So over a two year period it lost 3/4 of its value. And now it's been catching up a little bit where maybe it's bouncing. Or maybe it's looking to rally and work its way back up. Let's look at a couple other popular symbols. Here's Macy's. Macy's was as high as 40 to $45 a couple different times during the past three years. Over here was at $45 a share back in 2017 and over here back in the middle of 2018 we were up at $40 again after pulling all the way back down to about $20 or even lower. So it was a pretty good recovery. But now Macy's again has worked its way all the way back down, and right now it sits at about $16 a share. So when you're in the period where the stock is doing nothing but moving higher, like from October of 2017 through July of 2018 it looks very much like an apple picture where it just looks like it wants to go to the moon and keep going. And then something changes. Look at a stock like Netflix. Netflix over the three year period was down as low as 1 13 and as high as 423. So it tripled in value, or almost 3 to 4 times the value of where it was in 2017. And it did that, and only about a year and 1/2. But right now it's given back over $100 a share. And now that there's other companies that air competing with Netflix, what if the new Disney comes out and has a better deal and gets more popular than Netflix did? Could Netflix fall by the wayside, just like Blockbuster did from the video rental days? So even though Netflix looked from 2017 through halfway through 2018 it looked just as good as the Apple chart. Now things have changed, so why would you want to protect your stock? Because you never know. So in the next video, we're going to start by showing you how to use options to protect your stock position by just buying a long put, which will manage your risk to a level that perhaps will make you be much more comfortable to hold the position over a long period of time. 4. 04 Put Protection Basics: So here we are with our Apple stock, our 100 shares, that we spent $26,700 for. And let's take a look at what we can do to protect it. And since we think the move could be up to $300 per share, we have the potential to make $3600 here. And what if it went down an equivalent amount? We could stand to lose $3600. So what we want to try and do by buying protection and in this case, we're gonna buy a put. And a put is an instrument that will make money if the stock goes down. So we're going to spend some money on that put so that it will gain money. If the stock goes down to negate some of the loss will get for the price of the stock going down. So let's see what that looks like. And before I show you that just what if the price of Apple actually took off even more fiercely to the downside, came down to 200. Our risk is $6700 approximately and on the other side of the coin if it launched higher by twice a Sfar Aziz, we thought we might make $6700. So when you're doing the put protection, it's going to clip off the bottom side. But leave the upside where you can still make money. Now, it's true that because of the cost of the put, the amount of the gain at this point will be less. And we'll see that in a minute. So I'm gonna come over here and look at the option chains, and I'm just gonna look through. Here's all the different months, but I'm gonna come over to this side and in parentheses. Here I have what the expected moves are up to that point in time. So up to January they expect $21 up to March. They expect $33. So if I take $33 add it to the to 67 current price, that gives me approximately $300. So if I think that Apple's going to 300 the pricing of the options currently is suggesting that it may take until March to do it. That doesn't mean that it will, because Apple recently has gone much further than people thought in a specific time frame. And the same thing could happen to the downside. It could go much further than people think to the downside, but this is what the current price of the options is suggesting. So what we're gonna do is we're going to buy one put in March to see how it will protect our stock position. So I'm gonna open up the march options and for each option that we buy, it will protect 100 shares of stock. And here in parentheses, this 123 is just telling me the number of days until expiration from current day, which is November 18 2019. So I'm gonna come over here and just buy one off the first strike that's in the money here . And that would be the two seventies. And notice how the price the bid ask is 13 85 by 15 95. And for this example, I'm just gonna take the worst price. And it's true, we could probably get $15. But I'm just gonna put the worst price to show you, you know, worst case scenario and let's pick that and I'm going to change this to one contract and I'm gonna lock it in at 15 95. And I have the price that I bought the stock locked in it to 67. And now let's take a look at the risk picture and see what it looks like. See if it helps us any just going to scroll this down a little to make more room and notice how I still have my upside potential here because I'll make money, the more the stock goes up. But what I've done is I've clipped off the downside, and I've clipped it off at about $1295. If you look at the blue text in the box on the bottom left, you'll see that the pink line is the current price. If Price were to move all the way down to this level at today's date, it would be down $1130. But if it expired in March down here, I would lose $1295. But the good news is we've protected ourselves from a major downturn. Now, if you remember, without the put, I was looking to make about $3600 if it went up to where I expected. And if I add the put now, I'm making maybe $2000 at expiration or a little more $2400 if it happened sooner. And that's for the stock going toe where I thought. And then if I just hover over here, it's showing me that $1295 is the worst Aiken do. I'm protected toe where I can't lose more than that, even though I have $26,700 into the stock. The amount that I can lose if I keep this position on the put position with the stock is $1295. And for some traders, they may say, Hey, I'm keeping Apple for the long haul. I think it's going higher. I don't need any put protection And if that's the case than more power to you because some people would rather not protect it and take all of the money that they can. Some people also would not ensure their house if they weren't forced to. Now, in trading, nobody forces you to protect your stock position. You just have to have the money to take the loss if the price started going down. So let's take a look at what the put would do without the stock position, because what we're doing is we're seeing an image of what the stock and the put position risk picture look like when they're calculated together as a unit. If I was to take off the stock position, you could see that the put position itself costs 15 95 and the put position loses money if the price goes higher. But it makes money if the price of the stock goes lower. So if the price of the stock went down to 2 20 this put position would be worth $3400. And what that does is it negates the price of the stock going down now. Does it negate all of the price of the stock going down? No, that's where that risk comes in that 12 95 we were looking at before, and that's just for this example. As we move on to later lessons, I will show you how choosing different strikes and choosing different expirations will affect what that 12 95 risk might look like. It could be more it could be less depending on what you choose. And when you are choosing, you're choosing to protect yourself in a way that you're comfortable. So now if I put the stock position by itself, we have this which I showed you before and when I put them back together. I have this picture. Let's take this one step further in the next video. And let's make believe that you bought the stock at a lower price and you want to protect a profit instead of just protecting your current stock that you're buying today. So let's see what that looks like in the next video. 5. 05 Protecting a Winning Trade: So here's our chart of Apple, and I'm hovering over the area of the break out where we came back above this level here. Back in October of 2018 Apple had reached about $230 a share, and then it did have a pretty good pull back back to 1 40 and now it's worked its way back up. And when we broke above that $230 level, let's say that you bought the breakout, and that's when you initially got into your 100 shares of stock, and right now you would be up $3700. So let's look at what buying a put looks like on that position and see if it's worth protecting. Your gains because of Apple was to turn around and come back and retest the breakout. You would give all of that $3700 back, so maybe you think Apple's still going to 300 but you don't want to give back that much money to find out. So let's take a look at the risk picture. So here I am, back with my 100 shares of stock, but what I'm gonna do is. I'm just gonna edit this to be $230 a share because that's what we said we bought it at. And that would mean that we're currently over here p NL Open. We're currently up $3700. And now if the position went where we thought instead of a 37 $100 gain, we would have $7300. And if it went back to the downside, that seemed proportioned amount. We would be back to break even or somewhere near break. Even so could we use a put to protect our gains where we still give ourselves the opportunity to capitalize on Apple going to 300? But we're protecting our downside to see if we can keep a profit here. So I'm just gonna check off that same put that we bought before for the $1595 it's still costing the same amount. But what it's doing now is it's protecting our $3700 gain or $3600 gain. It shows now, and the reason it's showing $3600 now is because we overpaid for this. Put, it's factoring in the average price of the bid. Ask, which was between 13 something in 15 95. So it's giving us about $100 loss for the put because we took the worst price and I just wanted to do that to give it a neck stream example. We would definitely have been able to get a better price than the 15 95. So now, if Apple does go where we think it may weaken, still make more money from our $3600 level up to about 6000. But instead of giving back $3600 or $3700 we've capped it off to where the most we could lose is a gain of $2400. So we are giving back about $1200 if Apple was to tank. But we're protecting our gains to where we still have a gain of $2400. So for some, this makes more sense. But really, you're doing nothing different. You're just putting the protection on after you've made money. It's still the same amount of risk that you're saving. It's $1295 risk. Using this option, I'm either risking it from the start off of purchasing the stock at current price or if I've made a gain, it's the same risk. I'm risking about $1295 of my current gains to buy this protection. And just remember that this protection on Lee lasts until March and we'll look into some different expirations later on. This looks all well and good, but you might ask, What's the catch? And that's what we're going to explore in the next video. 6. 06 What's the Catch: I've put the risk picture back to the stock price being at $267 a share, as if we were just buying it today. And I've added the put protection at that 15 95 price. Like we said, it was the worst price that we could get it at. But we're going to use that just so we could be consistent with the price we're paying throughout this course. So that means that your results and your risk would always be better than what we're talking about here, and in this case, the amount of the risk is $1295. Using that 15 95 is what we're spending on the put. And the reason that the risk is 12 95 which is lower than what we're spending on the put is because the put were buying is in the money. We're buying the to 70 so there is almost $3 of real value in the put. We can't lose all $1600 that we're spending. We can only lose 12 95 if the price were to go all the way down. So we asked the question. What's the catch or what's the drawback to using put protection? And if you've looked at what's happened to the potential profit, you'd see that that $1295 is affecting how much we could potentially make. If we came out here, you're making $1295 less, then you would have because it costs you money to buy the put. So that's one of the catches you don't make as much profit as you would have had you not had the put protection. But remember, everything is a trade off. When you're using options, you will improve the risk in one area and you will weaken the trade somewhere else. So, in this case, were weakening the potential profit in order to protect our downside. Now the next drawback is even more important, and that has to do with time decay. If I look at my position here, I have a fate a value of minus 5 to 5. So that means that every day this trade is losing $5.25 and the reason for that is that the option value the $1595 for the to 70 put, there's only $3 of that. That's real value based on the current price and all of the rest of it. The 12 95 is the hype value, the time value, the implied volatilities value. All of that comes up to that 12 95 amount, meaning we're spending that amount to buy the protection. And only that $3 amount is the real value, because the stock price is $3 less than the 2 70 put we bought. So what does that all mean? And the answer is simple. If we owned just the stock and Price stayed completely still and did nothing, let's say Price after four months was right back where we started. A to 67. If we owned the stock, and Price went up a little and then down a little and came back to to 67 4 months later, let me just uncheck this. If four months went by, our stock would still be a to 67 our profit and loss would be at zero. And if Price went up a little, we would have a little bit of a gain, and a price went down a little. We would have a little bit of a loss, and that's four months in the future. But the price of buying that put protection is gonna affect that profit and loss. And let me check that back on again. So now if four months go by this pink line, which is today's current profit and loss, is going to form fit down into this blue line, the fate of value is going to keep increasing day by day. Eventually, we would lose $1295 if price wound up finishing in this same location. So it's similar to where you're buying homeowner's insurance on your house. If a year goes by and you've paid for the insurance, you've lost the money that you've paid for the insurance. But you still have the house and the same thing here. You would still have the stock at $267 but you lost the $1295 that you paid for the insurance. And on this broker platform, it gives me a way of advancing the date. And if I was to just keep scrolling this date, you could see how the pink line just keeps form fitting down lower and lower into where the blue line would be. So if stock price stayed exactly the same as days go by, I'm losing more and more money by using this put protection. We're protecting our downside. But we also need the stock to make a move as we expected it to, and we needed to do it in the time frame we're selecting. And this is where we're going to look further into which expirations to pick so that we give it enough time to get up where we think it may go. So if we bought four months protection and it takes six months to get here, but it spends the 1st 4 months down here, we would have lost the 12 95 and then we would need to buy additional protection, which would cost even more money. In the next video, we're going to select different expirations and see how that effects the protection that were buying. In some cases, it will be less costly, and in some cases it will be more costly. So let's see in the next video how that works out 7. 07 How Do Different Expirations Affect Our Protection: in this video, we're gonna look at what the effects are of changing the expiration of the put protection option that we buy. So in each case, we're gonna buy 1 to 70 put. But we're gonna look at the different risk pictures for buying the different puts. That air shone down here, so I have the January 2020 Put the March 2020 the June 2020 January 2021 then January 2022 . So for Apple stock, you can buy options all the way out to January 2022. If I come over here to my option chain. January 2022 is 795 days out, so I can protect my stock position for over two years. But it would cost me a pretty good amount of money. But compared to what it costs for two months, like protecting it to January is going to cost $10. And when you see $10 that means times ah, 100. So it's gonna cost $1035 to buy that option. And if I see $40 here, that's $4000 that it's going to cost me to buy one put contract, which is controlling 100 shares. Remember, we said that all of these options air controlling 100 shares of stock. So if I buy a put, I would have to multiply the number that I see here times 100 to get the cost of the option itself. And the more time you buy, the better price. It seems like you're getting and just think of it is buying insurance on your house. If you wanted to buy a two month homeowners insurance, they would beef up the price because maybe you're just buying the insurance toe weather a storm and then you don't want it anymore. But what if you compared buying a year's worth of insurance in one policy and comparing that to buying 62 month terms? You would wind up paying an awful lot Mawr if you bought short duration insurance. So while you do get a better deal, the more time you buy, we're gonna look at the risk picture of each of them to see Well, maybe we don't need quite that much time. Maybe we think the stock is going to make a move in a certain time frame, and once it does, we'll just exit the position and we'll get rid of our put protection and we'll get rid of the stock. And for some people, that's just how they trade. Once it makes the move there out and for other people that are long term investors, maybe you use a two year option to protect it, especially if it's FD. You've already got some gains because it may be worth it to you and each traders different . So let's look at the risk pictures. Here's my stock position again at $267. And for now, I have this date at the March expiration, which is just showing me that shaded area of when we expected it to get out about 300. But the cost of buying a January put for $10.35. That would make my risk B $735. That's the Max los I could take. But what happens is if Apple stock is still a to 67 when January 17th rolls around of 2020 then I'm out that $735 that I paid for that protection for that period of time. Now, if Apple stock happened to move up to that 300 level in that short duration of time, I would make more money because the amount of protection cost me less. So here I would make $2700 because my Max lost was only $735. And if I go to select the march again, if you remember, the march was a $1295 risk, and if Apple got all the way up here, we wouldn't be a 27 $100. We'd be down a little lower. So the more protection that you buy, the more the cost. If Apple was to move up quickly to $300 or in that vicinity, then you would make less money because of the amount of money you spent on the protection. So let's just take a look at the different expirations and see what they do. So $1595 would be a risk of 12 95 and remember, that's because we're buying the option. The put option slightly in the money, meaning there's really value their because the current stock price is $3 lower than the 2 70 So let's see what June looks like. So June protection. The Max loss would be $1910. If I was to go out even further toe one year, it would cost me 2900 and $65 to buy the January 2021 option. The 2 70 put and my Max loss would be $2665. And if I wanted to buy Xtreme Protection, go out that 790 days or whatever that was that we saw before, it would cost me $4000 for that one contract. The one put contract, and it would make my risk B $3700. But I would also have two years for Apple stock to keep moving higher. If you're a long term investor, you may just want to buy a long duration protection because the longer duration if you buy it upfront, it costs you less money per month. For that protection. You're getting a better deal, but if you're a trader and you're expecting the stock to move in a certain time frame. Let's say it's two months or four months. Maybe you just buy a put option that protects you for a month or two longer than you think it's going to take so that you have enough time to be right. And when you're trying to make this decision of which one to buy, you want to make it based on what you believe is going to happen. Because if you try to follow what someone else believed as soon as the price starts moving down, you'll panic and do the wrong thing. When you put a trade on like this, if your plan is to put this protection on and give the stock, let's say it's three months or six months to move where you think it's gonna go. There's really nothing to do with this trade, other than to let it run its course. In the next video, we're gonna experiment with different strike prices instead of buying the to 70 put what if we bought instead of slightly in the money? What if we bought the to 65 where the to 60 put or what if we bought the to 75 with the to 80 put if they're available, we'll stick with just a March expiration so we can compare what the different strikes would do to our position. 8. 08 How Do Different Strikes Affect Our Protection: here's our apple stock position again. And what we're gonna do this time is very the strike price. We're going to stay consistent and use March 2020 expiration for all of these examples. But we're gonna vary the strike price by $10 increments, and currently the stock is at 2 65 80 This is at the close of November 19 2019 and there's two areas that I want you to pay attention to. One is going to be the $300 line, and what I did is I added another price slice here. The top number, the negative 1 20 is what the value of our stock position is based on buying it for $267 with the current price of to 65 80. So the stock position is down $120 and this other line that I've put on the screen is gonna monitor what our position is worth at the $300 level. And then as I select the different put options, you'll see that when price would get up to that $300 level, it will be a different amount of profit based on which put we choose. The different strikes that we're gonna pick are gonna affect our profit. But they're also gonna affect our risk. So the other place that we're gonna need to look and let me select the 1st 1 so I can show it to you is if I hover over here, where the max losses where the blue line flattens out here. This is the maximum amount I could lose if I choose that put option. And in this case, it's minus 25 75. So we're gonna be paying attention to the box in the lower left and looking at the blue text to see what the expiration risk is on that trade. And as we choose the different put options, that amount of risk is going to change to make it easy to see. What we're gonna do is we're gonna look first at the risk amount and select all of five different choices. And then we're gonna look at the $300 level and select the five different choices instead of bouncing back and forth where it may get confusing. So if my risk is 25 75 with the 2 50 put if I uncheck the 2 50 check the to 60 put notice that my risk has dropped to 1920. So by picking a put that's closer to the money, it's still out of the money, but it's closer to the money, or at least closer to the current stock price. I've lowered my risk. So now let's choose instead of the 2 60 let's choose the to 70 and the 2 70 is an in the money option because the prices at 2 65 80 so is in the money by over $4 and right now my risk would be down to $1370. The more I move my put in the money, the more it's gonna cost. If I choose the to 80 noticed, my risk is down at $920 so I have a position that's a 20 $26,000 for the stock. But if I buy an in the money put, I can limit that risk down to a very small amount. And let's take a look at the to 90 and I'm sure that a lower it even more and Now the risk is only $615 so a very small amount of risk. But I don't know if you've been noticing, but the line is dropping over here on the profit side. So let's start our way with the best risk number, and we'll look at what the price our position would be and what this area right here, this 1400 is going to show current day as if the price got up there today. So it's it's monitoring what that pink line would be, which is about $1400 up right now. So if I did get Apple to move all the way up to $300 today, where it coincided with the pink line, I'd be up $1400. But if I was willing to take more risk on and choose the to 80 instead, notice that I'd be profiting 1700 change, and if I moved it up even further, the to 70 put That would give me $2100 profit if Apple moved up to $300 today and it just keeps getting better and better on the profit side. So if I go out of the money the to 60 because it's costing less. If the stock actually moved higher, I would just profit more and notice that would be 2400. And of course, you would expect to see the 2 50 put give me in the even higher profit of up to about $2600 . The key here is to find the one that you're comfortable with based on what you think is gonna happen. If you thought that Apple was gonna move way more than expected, could you afford a more in the money put to lower your risk? And then if it moves the way you thought, you would still make a substantial profit if you risk more money with this protective put strategy than your profit increases if you get the move in the right direction. So the take away here is just to realize that you have a lot of choices and you can control how much your risk is, but it does affect your profit. So if I take on more risk than I will make more profit, if the move goes where I think it's gonna go, or in this case, if if Apple went up to 300. But if I want to limit the risk, then my profit would be smaller if the stock moved up to where I was expecting. Up until now, we've been using just Apple as our example, and for some people that's a little bit pricey of a stock toe have in your portfolio. So in the next couple videos, we're going to do the same thing. We're going to use a protective put, but we're going to do it with stocks that are a little lower in price, so you can see that the strategy will work regardless of what the price of the stock is. 9. 09 INTC Protective Put Example: in this example, we're going to use the stock Intel. The symbol is I N T C. And at the close today, Intel was selling for 58 27. So the cost of 100 shares would only be $5800 approximately, unlike Apple, which was costing over $26,000. And what I'm gonna do for the next couple examples is we're going to stick with the March options so that we're comparing, you know, about the same distance out, and I'm going to choose the first strike that's in the money on the puts. So that means since the $58 is the current stock price I'm gonna look for And if I come over here to March 20th the first strike in the money is the $60 put the 57 50 is out of the money. So if I choose the first strike in the money, it's gonna cost about 4 20 And if I select that, it's going to limit the risk and make this line flatten out. But where it flattens out, we'll find out in a moment. Right now, I have the shaded area showing the expectation for March 2020 and the potential here is that maybe I make $700. Or maybe I lose $700 if that 68% probability pens out and the stock finishes somewhere in this range or makes its way up to one of the extremes here. So by putting on the additional put and I'm buying a long put, the $60 put and it's costing $420 for each one, and in this case, I'm buying one. What it's doing is it's taking that 700 plus dollar risk, and it's bringing it down to 247. And just like when we were using Apple, the price that you pay for getting this protection it comes off of the prophet that you could make if the stock does move where you think it's gonna move. So what you're doing is again, you're just picking out an option to protect yourself to an amount that you feel comfortable with, and you have to realize that the amount that you're gonna profit may not be what you expected, depending on which put option you do choose. And if you ever set up a trade where you don't like what the prophet will be based on the put that you have tow choose to be comfortable with, then you're just not ready to get into that position for the example we're using here. Would it be worth making 300 to $400 over the next four months and risking $247 to do it? And I could put this trade on and not really have to worry about it, no matter what price did. Because I'm not really risking that much capital here. And if that risk reward is good enough for what you're trying to accomplish, then this could be a good trade. Now we're going to talk in a future lesson on when might be the best time to get into this trade. Could we use this on a pullback, or could we use it when it's already at all time highs or where is the best spot to do it? And in some cases it may not matter, and in other cases, what's gonna matter is what the expectation is and how much you want to risk to see if you can achieve that expectation. So in the next video, we're going to just drop it down a little further in price and choose a stock that cost even less than Intel and see what kind of risk reward we can get out of that. 10. 10 GE Protective Put Example: in this example. We've brought our stock price down even lower, and we're gonna use General Electric symbol G E. And the stock was selling for $11.50. So we're gonna buy 100 shares and we're gonna use the March 2020 and the $12 put would be the first strike in the money. And that's going for a dollar 17 right now. So that's $117 it would cost. So if the expectation for March is to go up, asshole I as 13 70 possibly as low as 9 38 than the amount we're risking if we just had this stock is a couple $100 so it doesn't sound like much, but if you were trading G E, maybe you wouldn't do 100 shares. Maybe you would doom or like, let's say you're setting up an account where each protective put position is $5000 you're allocating maybe a $25,000 account into five positions. So if you were using Intel, you might be using 100 shares, and if you were using General Electric, you might be using 400 shares But for now, let's just use the 100 shares and the risk is about $200 using the one standard deviation move. And if I put the protective put on and just check this box here, notice that my risk is down to $67. So the put, even though it cost me some money, and it costs a little bit of the profit if the price of the stock did go higher to where we expected 13 70 I've lowered my risk substantially. So here I have $67 risk all the way up until March 20th. I'm protected, and the potential is that maybe I make 100 to $130 here. And let's say we did bump this up to the 400 shares that we were talking about. If we were establishing a $5000 position, I would then have to increase my puts up to four contracts, and instead of $67 risk, we have four times that amount. Now it's $268 and we have a chance to make, let's say, $550. And that may not sound like a lot to some people, it really depends. If you were toe do this and your other positions were doing Justus well over a 3 to 4 month period, then your account would be moving in the right direction. And remember, we just wanna have a steady upslope to our profit curve as where, as as our account is growing. So we want to do something where we can minimize the losses but still have some gains. So this protective put strategy does a really good job at minimizing the losses for you if you choose the right strikes and the right expirations. The one thing I like about the G E choice here and let me bring a let me bring a stock chart in on G E G E has been beaten down from over $30 a share at the beginning of 2017 and by the time he got to the beginning of 2019 it was down under $8 a share, so it lost 80% of its value. At the beginning of 2019 the low point was down under $7 a share, and right now we're at 11 50 approximately, which is over a 50% gain off the lows. So what looks interesting to me on this position now? Maybe it won't recover by March, but could you take a position in G E? If you were bullish or thought that it was going to come back even if it came back to $15 or $18 or $20? Could you by the stock and protected for more than just till March, maybe for a full year? And would that give it enough time? And would it be worth the cost of the protection if it got to $15? Or maybe it would only be worth it if the expectation was $18 and that's what we have to figure out when we're putting on a position, you can set up the protective, put on any stock position. The problem is, is it worth doing? Will the price move where you think it's going to go, and will it move enough? And is it worth tying up that money for that long a period of time? And that's what each trader has to figure out for themselves because if one person is doing it one way and you don't feel comfortable doing it that way and you're trying to follow along with that person, you're going to sabotage the trade because you're not comfortable. And that's the hardest lesson that we have to learn myself included. When you're trying to get good at something that somebody else is doing. If you don't understand their reasons for being in the trade and what their plan is and what their comfort level is with the amount of risk they're taking, you're not gonna act the same way that they do. That's the critical point of why you have to experiment with a few positions and put on a series of trades so that you get comfortable with a strategy and then you can implement it to your needs and not the needs of somebody else. 11. 11 Ford Protective Put Dividend Considerations: in this video, we're gonna look at some dividend stocks and see how the dividend might affect our decision on which stock we buy and when we buy. So the 1st 1 we're gonna look at is Ford Motor Company, which is symbol F. And currently the stock is going for $9.27. So if we were using $5000 per position like we were talking in a prior video, we could afford to buy about 500 shares. So 500 shares of Ford would cost us about $4500 maybe a little bit more. And then if we were looking for our put position, let's say we were going to use June and we went one strike in the money, which would mean let's come over to the option chain. If I go to June, the first strike that's in the money would be the 10 puts, and they're costing a dollar 25 and the other one that I've put down as an example is the January 2021 and let me go up to them. And in this case, the $10 puts for January. They are a dollar 68. So that's where these numbers are coming from. And in the first example, we're going to choose the June and we're going to see how it affects our position. But let's just look at the stock position first, and I'm going to switch my date over here till June expiration just so we can see what the expectation is for that time frame. So maybe if Ford follows expectation, there's a reasonable percent chance that it's going to remain between $7 say $11. So here, if it got up to $11 we could make $900 on our $4500 position or $5000 once we buy the put protection. So once I add the June puts into the picture, notice how my risk up until June expiration is only $260. But the price I'm paying for those puts it would be five times $125 from paying $625 for the puts. And if you add that to the $4600 I'm spending, I'm spending about 5200 and $50 and the cost of the puts is affecting what my profit would be if four it actually got all the way up where we thought it may go during that time frame . So you may only make $500 if it gets up on today's date. But even if it got up near expiration, your amount would be about, you know, to 79 to $300. When you're trying to make these selections, you have to have a reason why you're getting in. And let's just take a quick look at the Ford chart and see if there is any kind of reason. And then we'll talk about the dividend part of it. And I'm looking at a weekly chart that is showing me about three years worth of time. So here we're starting back in January of 2017 and I'm showing all the way up to current Date. And in the past year from 2019 the range was about $7.50 and it went up asshole I as $10.52 . But the year before, in 2018 it had a low of about $7.50 but it also was up near 13 50. So is this going to be a year where Ford maybe comes and works its way back up to the highs here up to 13 50? Could that be the expectation that makes us want to put this trade on and leave it on for a period of time to see if we can capitalize on a move back up in this area? So if that's what you think may happen because of what you feel is gonna happen with the car industry or if it's just a chart play, whatever the reason, we can set up the protective put position to try and have a minimal risk situation to give you a chance to capitalize on what you're thinking may happen. So if I come back to the analyzer, if it did wind up going up to say 12 or $13 that would be great because then we would make on our $5000 investment. We could make 800 to $1000 now, even if we made $500 that would be a 10% gain. But if we could make $1000 making 20% on our position would be a great thing. And remember that our risk if we bought the June puts is only $260. And now here's the kicker. Let's take a look at the dividend. Let's go back to the chart for a second and what I have here. A to bottom of the chart. This dollar symbol is going to show me how much the dividend is on this stock and the next dividends actually going to be on January 29th. So that means you have to own the stock before January 29. If you want to be entitled to the dividend, and then they will be a pay date where you'll actually get that money. If you were an owner before the ex dividend date, so as long as you owned it before January 29 you're in good shape to have that dividend. And if you buy the stock and plan on holding it, then you would get whatever the dividend is each time, which is usually quarterly. And if I look back in history, it was a 15 cent dividend here, 15 sent here and if I worked my way back and I could even go back and check a couple years back. Board consistently has been paying a 15 cent dividend for the last three years. So 15 cents. What does that mean? It's 15 cents times 100 shares. So when you're getting the dividend, you're getting $15 for each 100 shares that you have. So how many shares do we have? We have 500 so that means that the dividend is gonna pay me $75 each quarter. So how does that affect my risk if I have a risk of $260 to give this position a chance to move higher? I'm also going to get a kicker with dividend for $75 in January, and the next dividend will be in April. And if it remains a 15 cent dividend, I could get another $75 in April and that would mean $150 in dividend money would make my risk effectively be just about $100 or slightly above it. So is it worth it to you to try and put on this position where you're going to collect the dividend a couple times as long as that dividend stays at the same level and risking 100 to $120 for an opportunity to make maybe only a few $100 if it goes up to here. But if your expectation is that Ford may take off and your technical analysis says it could work its way back up to 13 then you could stand to make a pretty good percentage here. But let's take it one step further. What if we decided to choose January instead of June, so it's going to cost us more to pick January. It's going to cost us another $43 times five. So it will be another $215 to buy the January puts instead of the June puts. But there will also be tomb or dividend periods before we get to next January, so there'd be a total of four. So if I was to check the January puts, my wrist does go up to 4 75 instead of to 60. But now I'm going toe have four dividend periods of potentially $75 each, which would take $300 off my total risk, which means that I could put this position on for $175 risk plus commissions. I could have this Ford position until next January and give it an opportunity to get up to the level that I think it may get to. And let's just expand this calendar a bit to see where the expectation is for January, since we're picking the January options now. So they're showing the expectation on Lee out a little bit further than it was for June. But from our technical analysis on the chart, we're thinking that there's a possibility it could get to the $12 level or maybe even $13. Now, of course, Ford could go down right after we put the position on and buy the stock and put the puts on . And if it did go all the way down to $7 we would still have 500 shares of Ford stock. That's worth $7 which if next January we decided we just wanted to get rid of the position . We could get rid of it for $3500 but our $10 puts would be worth If the stock was all the way down at seven, they would be worth $300 each. So even though the stock would have lost value and only have a value of $3500 are puts would be worth at least $1500 that would make up most of the money. We would have $5000 pack, and then we still would have collected the dividend, so the amount of risk would be quite small for a long period of time. But keep in mind, Ford stock is not like an Apple stock or an Intel or a stock that moves a large amount in a short period of time. So while this is definitely a low risk play, you have to decide if you want to tie up the amount of money it cost to put this position on for the chance that it may go up to this level because it for just stayed in a range of let's say 8 50 to 9 50 for the next year. And let's just go back to the chart. Where was it for the past year was down his lowest 7 50 when as high as 10 50. So if we come back to hear it was a slow is 7 50 it was high as 10 50. The amount that you might make if it stayed in that same range as it did for last year might not be worth putting the trade on. And maybe you would look for a different stock instead of Ford. As we evaluate this, it's not a bed chance, especially if it's your expectation that Ford is going to move up to that 12 or $13 level. Once again, the risk is minimal. So if you're doing this protective put strategy and let's say you're putting on five positions, would you do is you have a group of stocks that you looked through and you set up the potential trades for, Let's say, five or 10 stocks, and then you just pick the best of the ones that seem right for you, and there's no one position that's going to be right. You could always look in hindsight and say, Oh, this was the one because it went up. But what you're doing is you're placing your best bet and you're protecting yourself so that you don't have risk on the table so you can sleep at night. In the next video, we'll look at another dividend play. But this time, instead of us having an expectation that it's gonna just go up and recover back to a certain level, it's gonna be a stock that often times just stays in a trading range. But it pays a decent dividend, and it may be worth looking at with a protective put position, so I'll see you in the next video. 12. 12 EPD Protective Put Dividend Considerations: in this video, we're gonna look at enterprise products. The symbol is E. P. D. And this is a stock that for the last three years has pretty much stayed in a range. So I've put lines on the chart showing the $30 level appear, and I have also shown the $24 level. And it seems like whenever it gets up near that $30 level, it turns around and goes back to the other one, and it's done it a few times here. So going back three years ago, when it was up at the $30 level, it worked its way all the way down to 24 in less than a year. And then it quickly worked its way back up. This was a much shorter time frame a few months and then came all the way back down again in another few months, and then I went back to taking a little longer to do its thing, but it still has worked its way back and forth, back and forth. A little bit of a glitch here were thought about going higher, but then it came back again, and now it's working its way back up to the $30 level. Now, is it something where this is going to keep happening over and over again? We don't know that. The potential is that we could get into this position and ride it on the way up. Now, if you were in tow, a position like this, if you were looking to set up a protective put position, would you rather be a buyer of this stock and put on the protective puts in this region? Or would you rather be doing it when it's down at the lower level? And, of course, you would rather be a the lower level if you thought it was going to go higher, because then you get the appreciation of the stock and maybe when it gets up to the $30 level, you just get out of the position because you know where you feeling is that it's gonna go back down. So for a position like this, unlike the Ford position where we were looking toe have enough time for it to move up to a certain level. We thought it was gonna work its way back up in Ford's case to the $13 level with enterprise products. We just think it's gonna bounce around and we're looking to get on board when it's down near the lows. But just in case something happens where the stock crashes were using a protective put to protect our investment. So let's look at how much it would cost to protect it. What I've set up here is the stock price was bought at $29. And here, since this is after hours, it's showing that the last sale price was 28 93. And right now, because we're in the after hours, the bid ask is very wide on this particular stock. So for this example, we're going to take a little bit higher price than the last sale. And we're just gonna make believe that we bought it right at the end of the day. Just so we have fair numbers because we would never have bought this at the 29 74 level and for this example, I would have preferred to have bought it a few weeks ago when it was down closer to the 24 level. But it won't make a difference. We still want to evaluate the position and see how much it costs to protect it and make a decision on if it's worth it. So $29 a share and that's $2900. So we really can't buy 200 chairs. We're gonna have to stick with the 100 shares, and then we're gonna need to buy one put. And in this case, if we by March it would be $120. If we bought June, it would be 100 $95. So looking at my risk picture, I have my date set for March, and the expectation for March is that it could be from $26 to just over $31. And even though on the chart we've seen that the stock turns around when it gets around that $30 level here, they're forecasting that there's a possibility that it could be above $31. So if we're getting into 29 we have a way of capitalizing for a couple $100 on the stock price. If that's where we thought it was going, and maybe a couple $100 doesn't sound like much, but look at what the risk is when we're buying that march put for $120 were only risking 100 $20. And now let's look at the dividend part of this. Let's go back to the chart of second the dividend. We would need to be in the stock before January 30th if we were going to put this position on, but the dividend is 0.445 which is $44.50. And if I go back in the history of the dividends, I can see that there were 44 25 here. It was $44. Here was 43 75. Here was 43 50 and it looks like they're increasing the dividend by a very small amount every time, which is a good sign. So it's a $44.50 dividend that we would receive if we were the owners of the stock before January 30th. Going back to our risk picture. If I was to take the 44 50 off of that 1 20 I'm really only risking $76. So is it worth risking $76 to see if the stock goes up to that $31 level by the end of March or by March expiration. Maybe I will make $100 on this. If it went all the way up to the outer edge of this expectation, maybe a little bit more. So as I look at this, you could see that maybe it's not worth it, because we're a little bit late to the party and going back to the chart. Could I have maybe gotten into this stock? 123456 Maybe a month, month and 1/2 ago? If we got in this position when it was down a $26 then we would have the $27 puts and we would have a position that has some room to appreciate in price. So even though this is late to the party, it's still a low risk trade. But there's one other thing that you can do that I've noticed on enterprise products. If you look at what happens as it goes into the time of the dividend, whenever we're getting to dividend time because it pays $44.50 per 100 shares, people buy the stock before the dividend and then after the dividend date, when they're entitled to the dividend, then they sell it. So let's just look in the history and see how that's happened. Here's the dividend. Look what happened after the dividend. Here's the dividend here it seems to work its way down. Here's the dividend here. Worked its way down again. Here's a dividend here. Now, In this case, it was already down, so we didn't get as much of a move down in this case. So now let's move over here. Here we will weigh a pie because the price had moved up because it was down near the lower level. Worked its way almost all the way to the upper level. But what happened when it became dividend time? This was a much larger flush right after dividend, because we were not only right after dividend, but we were also up the level where a lot of people are thinking, Hey, this stock's gonna turn around anyway. So what I'm seeing on this chart is that when the dividend period coincides with the upper region, we get a pretty good sell off after the dividend here. So here we're in the upper region. Here comes the dividend, and then we get our selloff. So this gives us an opportunity to make money a couple different ways. What if we were to get in a position down here, and then when the stock appreciated up, it gets up to the $30 level, we collect our dividend. And then if the price of the stock starts to move down, we get out of our stocks and just hang on to where puts for a little bit and put a stop on them so that if Price did start to go higher above that $30 level, then we would just sell those puts to close the position. But if Price really did go way back down right after the dividend, we could hang on to the puts a little bit longer and then make some money on the puts as the price of the stock went down. Now this is a little bit more advanced to do this, and you would have to practice doing it, an experiment with what you're comfortable with with the different scenarios. So you have to find a stock that's going to stay in a range like enterprise products here. I've noticed a pattern of its selling off after the dividend, which is common, but I've also noticed that it sells off rather strongly when it's up near the top of the trading range. So if you can find a stock like this or another one that's similar where you're getting in and setting up a protective put position when it's down near the lower end of the trading range, it might be something that's worth practicing so that you can make money on the way up, collect the dividend and then potentially make some more money on the way down in the next video. We're just going to talk a little bit about implied volatilities considerations to see if there's a better time to put these on, based on what the options are going to cost because of the hype value in the options and that hype value is implied volatility. So I'll see you in the next video 13. 13 Implied Volatility Considerations: in this video, we're gonna talk about implied volatility and how it can affect your trade and your decision to put on the trade or your decision to wait a little while to see if volatility will drop, especially if you're looking to buy a protective put to protect your stock position. If you remember a few videos back, we said the implied volatility is the hype value of the option if implied volatilities high . There's an expectation that price movement is going to be greater than it may normally be. And if implied, volatility is low, the expectation is that the stock is going to be quiet and stay in a smaller range. And something can always happen to change what that view is. And the implied volatility numbers are updating constantly during the day. So here is our Ford chart from the last video, and what we're gonna do is I'm just gonna expand this a little bit so you can see the implied volatilities graft in more detail. And I have a three year graph right now, showing that it was at a level of about 29% and then it reached a high at the beginning of 2019 of about 52% and currently implied volatilities is right around here at 34%. That sounds all well and good, but what does it mean? Well, what it means is that when implied, volatility is low, the hype value of an option price is low, and you could buy that option for a lower price for a lower price than you could have had the volatility been higher. The opposite is true if volatility is high. If the volatility is highway appear at 52% and normally the volatility is much lower, then buying a put option or initiating a stock position and then trying to protect it with a put option. If you bought it when the volatility was at its highest, that it's been, or at least in the last three years, it just means that you're paying, ah, higher price for the option than you would normally pay. And in most cases, that's not going to be worth it doing in that way. Because then, if the volatility drops off in the next month or two, while your positions on your option is gonna lose value just because the volatility dropped regardless of what price does, and stock price will also affect the price of the put option. But you will lose value because the volatility has dropped. So what this all means is when we're putting on our protective put positions with our stock , we want to try and avoid situations where volatility is high. On this platform. I haven't implied volatility graph that I can look at, and I can get an idea of. Where is volatility now compared to where it's been, let's say, even just in the last year. So if I'm talking about the last year, I could look at just from 2019 to present and I could say, OK, we're at 34% now we've been as high as 52% and we've been a slow as 23% so I'm a little bit closer to the lowest it's ever been than the highest. There's a rating for implied volatility that will give us a way of telling, Well, where are we compared to where we've been for that? I'm going to go over to the ed simulated trade section of this platform, think or swim and I'm just gonna close up all of the option chains and come down to where it says today's option statistics. And if you look over here in this box, it's giving me the 52 week high implied volatility, which it was 46 a half percent. It's given me the 52 week low, which was almost 21% and the current implied volatilities rating is 34.34% and that 34.34 is right in between. The 20 were about to 13 or 14 above, and we're about 12 or 13 below the high. So what that's doing is saying that right now for Ford Stock, the implied volatilities of the options is somewhere about the 50% level in 52 in this case . So it may or may not be the best time to buy the put options. But if you're factoring in some of the other things we looked at in the prior video, where maybe you think Ford is going up to 13 over the next year and you're buying a long duration option, and when you build the position, your risk is good and you're factoring in the dividends, then it may still be worth putting on this position, but it also may be worth waiting a little bit, maybe for the volatility to drop a little, going back to our chart. There's a couple other things I want to show you about the volatility and what makes it go higher or lower. If you notice where the volatilities was at its peak, the market was going down. At least Ford stock was going down, and when it was going down over here, we also had a peek over here. But there's also another time when volatility normally rises and that's going into earnings . And let's look at the different earnings and see if volatility is rising as you're going into earnings and if it drops after earnings. So right here I'm going into earnings volatilities rising. The market also happened to be going down, so that also contributed to the volatility rising after earnings. It seemed to drop off and here we are, coming up to the next earnings. We got a little bit of a peak going into earnings and there was not that big of a change in this case. But let's just look quickly at some of the other earnings here, going into earnings, volatility rose and then right after earnings volatility dropped here going into earnings, volatility rose and right after the earnings, it dropped off again. So you can see that in most cases you'll get an increase in volatility going into earnings because there's potential for news to be especially good or bad. And that will make the stock price move substantially in one direction and depending on the stock. If it's a high flying tech stock like Amazon than the amount of movement may be extremely large. And that's why some stocks will have a much higher implied volatility number than some other quiet stocks like Ford might. Let's look at the other stock that we looked at when we were talking about dividends, and here is enterprise products and notice how the peaks in volatility Here's a peek and volatility. When price was coming down and as price started going up, volatilities dropped. And then we got earnings and then it's just finished dropping. And here's the other P. There was a volatility peak going into earnings and notice. This was also up near that $30 level to wear after earnings, we got the sell off. The selloff allowed volatilities to stay elevated for a little while until things started bouncing back off that lower support level. So right now we're at about a 20 implied volatility, and for 2019 we were as high as, let's say, 25 as low as 14. And if I go over to the analysed tab and add simulated trades and come over here for enterprise products will see that the implied volatilities 20 like we saw on the chart a minute ago. But our current Ivy percentage, or percentile, is closer to the high. Then we are to the low meaning that the 20 is closer to the highest we've had in the past year, which was 23.6%. Then we are to the lowest we've had in the past year, which is 14.5%. And if we go back to the chart, we can see that in the last year. And what's happening is we're just taking it from 2019 where 23 was the level. Now, the numbers on that prior screen we're taking into effect on Lee the past year. But we can see that on this chart, since it's a three year chart that implied volatilities does sometimes get much higher so we can factor that into our decision, even though we're up substantially in the percentile number compared to the last year were not up that high compared to what implied volatility can get to when it's at the extremes. The take away here is just that the price of the option that you're gonna buy, maybe temporarily overpriced volatility is high and just realize that that could affect what your overall risk could be. You could probably get a better deal maybe a week later or two weeks later, or maybe even a day later if you just gave it a little time. 14. 14 Evaluating Other Stocks: in this video, we're gonna look at a few different stock symbols and give a quick evaluation as to if it's a good time to get into a protective put position. I'm also going to show you how to set up the chart. At least in the Thinker swim platform. Each broker has a different way of doing things on their platform. But for thinker swim. I'm starting here now with a bear chart and we're gonna add a little space to the right because a lot of times it's a better visual. If there's a little empty space to the right of the chart, I'm also going to add the earnings and dividend information onto the screen. And I'm also gonna add the implied volatility study so that we can have the chart the way it was in the prior video. So let me show you how to do that. On this platform, you come over to this gear symbol and you just click on it and I'm gonna come over to time access and the time accesses the horizontal going across, and we want to change the expansionary. If you come up here, a number of bars to the right, and I'm just gonna change that to 10 and I'm gonna hit apply so we can see what it does. And that's not bad. We could do 20 and see if that makes it more appealing for us. Do we want that much room to the writer? Would we rather just have the 10? And for now, I'm just gonna use a number of 15 which gives us a little more than the 10 but not quite as much as 20. And that's how we just get a little space so that you can imagine where the stock may go from here. When it's right up against the wall, it doesn't let you visualize is easily where you're figuring the stock may go. I like to have some space to the right, and maybe you will, too, after you experiment with it a little bit. The other thing we need to do is come over here to equities and I'm gonna come over here on the left where it says show corporate actions and this is the check box that's going to allow us to see the earnings and the dividends on the chart. So I'm gonna hit apply and notice how that gives me all of these markings. So we know when those events have happened and where the question mark is right now, this means that this is a not confirmed date. But that's the estimated date that they think that the next earnings is gonna be. I'm gonna hit OK now. And I'm gonna come appear to studies. And I like to hit edit studies, and I could scroll down here looking for volatility, or I could just type volatility. And here is implied volatility. And I'm just gonna highlight that and I'm gonna hit, add selected, and we're gonna hit, apply. And now we have the volatility graph on the bottom, like we did in the prior videos. So then I just hit, okay? And then what you need to do in this platform has just come up here and hit save workspace , and I'm on workspace called video workspace. Right now. When you hit save and this way, next time you come back to this program, you'll have this saved. Now, if you have multiple different graph configurations, you may want to save this as one of your saved grabs. And I already have it in here. But let me just show you. If I wanted to save this, I would just come over here and type save grid as And this is giving me one chart. No studies, but I would put one chart with ivy and earnings and I could just click save, and I already have it safe. So I'm not gonna hit save You could then name your different layouts and let me hit. Cancel and I'll show you if I come over here. This is giving me all of my saved layouts. And down here is where I would find one chart, No studies. And this brings me back where we were before. And if I come back up here and click on one chart implied volatility with dividends and earnings, then it will bring that layout right back for me. So let's get back to a m. D. What we were looking for earlier and I am the right now is up near the $50 a share level. Well, it's down at about 48 or so today, but it reached a high of almost $50 a share. And if you look back just about a year and 1/2 or so, we were down at a low of $9 a share. So this stock A M. D. Has moved way up, but it also had a nice pull back here. So if you were deciding, I would like to get into this stock now, do you think now is the time to get in? Or maybe it would have been a better idea getting into this position when it took out the highs over here, at least in more recent times. That's where I would have considered getting in. Because then you could say, All right if it breaks out above here that it may run for quite a bit, and the amount of gain is about 10 to $15. So you could make money and still protect your position in case you were wrong and it actually fell back down. Getting in right now. You could do it. You would have to have the thought that this stock is going higher over a next certain timeframe. Maybe you thought it was going to 100. Whatever it is, you have to be comfortable with what you're doing and set up a trade that protects you in case what you're anticipating that is going to happen does not happen. And am D here gives us an opportunity to look at one other thing. That's a more advanced technique, but I'm just going to show it to you to whet your appetite. We're not gonna give examples in this course because this is a beginner course. But what if you bought into the A M D stock when it was down here near that $9 level? Or maybe as it started to move higher, you got in when it broke out above $14. Or maybe you got in a $10 and now it started to work its way all the way up to where you're up at $20. Is there something you conduce do to better protect your position than just own the stock and keep the put value down at Let's say you bought at $9 you may have bought the $10 put. Since my stock has gone up to $20 now or $10 a share, could I spend some of the gains that I've just gotten on the stock over the past couple months and move my put protection. Either get out of the $10 ones. If there's any value left in this case, there would probably be very little value left unless they were long duration, like a year or more. And spend some of that $1000 per 100 shares that I've made to protect my position toe, where if it goes down from this level that I don't give all of my gains back when you're putting these protective puts on their protecting you from the stock going down so that you don't lose a lot of money. Once you've gained a lot of money, it's in your best interest to either exit the trade or as you get more advanced and comfortable with this, you can roll your put protection up to where you spend some of your profit and buy a put at a much higher value. It will now protect your gains from going away in case the stock turns around. And like I said, this method is for more advanced option traders, and in the beginning you should start by just putting on protective put positions and experimenting with that until you're comfortable and taking the trade off. When it reaches the area that you were anticipating, it gets do. But once you get comfortable, we can look into an advanced or an intermediate course that will cover how you might be able to do an even better job protecting yourself. So before we end this course, let's just look at a couple more stock charts and just give a quick evaluation of would it be worth getting in now, or would it be better to wait a little bit? So I'm going to look at Cisco, and as I look at this chart, it was up, asshole I as $58 it's pulled back quite a bit back into the consolidation area over here. And this could be a good candidate where it looks like it's coming up off the lows, and it's consolidating here now. You could possibly wait until it breaks out above this level. If you feel that Cisco has a good opportunity to get back up to the $58 level and retest the high, it might be worth getting into a trade at some point soon. If you look at the different options to protect yourself, and find that you can get a six month option or a one year option that makes the risk reward worth it to you, then this might be a good position for you. What I like to do is look at the amount of time it's taken to go from that high down to the low we've gone from, let's say, July of 2019 and now we're in January, so I wouldn't do this position anticipating just a month or two. This would be more six months to a year that I think I would have to give it. So could you look at six months to a year options and see what it would cost to buy the stock and put on the put protection and what would be your risk and see if you're comfortable with it. So this is one toe look into, and that would be a good thing for you to try out on your broker platform and see if you can come up with a good trade that you either sim trade or try. But like I said, every investor where every trader is responsible for their own actions, it's not recommended to put on any live positions until you're comfortable with what you're going. So all traders have to trade at their own risk. So let's look at another one. Cisco looks like a decent candidate right now. Let's look at Freeport Mack Moran. Now this is a lower price stock right now. Is it about $13 a share? But it's almost up retesting the highs at about 14 and it's true that it's been up a Zayas 20. But that's almost two years ago, and it does look like maybe it wants toe work its way back up here. But this may have been a better try somewhere down here when it crossed past this level, you might have been a better deal to get in at that point and protecting yourself, because right now, for this stock to work its way back up to 20 I think you would have to give it at least a year of time again. You could price it out and see if it's worth it to you for tying up the money for a certain period of time and seeing if the risk reward is good for you. But for me, I would have rather gotten into this one more down at this level. All right, let's look at one more. I have us steel here, and U S steel was up, asshole, I as $47 a share back in early 2018 and it's worked its way down to where it reached a low of under $10. And we're not that far off of that right now. And it's true that U S steel could go down to zero. We don't know what's gonna happen with the company, but it's at a level where maybe it's starting to form a base. And if you could get into this with a longer term protective put position that didn't cost that much and let the risk be low, maybe it would be worth giving it a chance to work its way back up to the $15 level or the $20 level or even $25. But you would have to give it some time. So, as you can see, the possibilities are endless. There are a lot of stocks that you can look at charts all day long. The best thing to do is get some companies that you've heard of into a watch list that air in a price range that you're comfortable with either between 10 and $50 a share. And let's say you're making five positions of $5000 each. If you're using a 40 to $50 a share stock than you would by 100 shares and protect it with a put position, and if you're using a $25 stock, maybe you'd use 200 shares. And in this case, if we were buying U. S steel, you could buy 4 to 500 shares, and you would need four or five put contracts to protect that position. Buying stocks can be a great way to increase your account, but adding a put protection position to your stock position can potentially protect you and allow you to sleep at night. So consider it and spend some time with these techniques and see if you feel that protective puts is something that will work for you. I just want to say thanks for taking this course, and if you have any questions or comments, you can contact me at Steve at Blue chip trader development dot com. Have a great day